Bouygues SA (OTCPK:BOUYF) Q4 2021 Earnings Conference Call February 24, 2022 5:00 AM ET
Company Participants
Olivier Roussat – Group CEO
Pascal Grange – Deputy CEO & CFO
Frederic Gardes Colas SA – CEO & Chairman
Pascal Minault – Chairman & CEO, Bouygues Construction SA
Bernard Mounier – Chairman, Bouygues Immobilier SA
Benoît Torloting – CEO and Deputy GM Consumer & Pro market, Bouygues Telecom SA
Conference Call Participants
Nicolas Cote-Colisson – HSBC
Mathieu Robilliard – Barclays
Virginie Rousseau – ODDO
Sam McHugh – BNP Paribas Exane
Nicola Gifford – Goldman Sachs
Olivier Roussat
Good morning, everybody, and welcome to this presentation of the Bouygues group’s 2021 results which I will be commenting with Pascal Grange before taking your questions at the end of this presentation. We will have the heads of all our 5 businesses here to answer your questions this morning.
Yes. The questions will be the at the end of the presentation if that’s okay and we’re going to go through the presentation. Okay, we are back posting growth because our results are excellent as a result of which the Board of Directors is proposing a dividend of €1.80 per share, which is a good reflection of our confidence about our future and net debt is at least in historically low level as a result of which we have great investment capacity. And in 2021, we grasped 2 unique opportunities with a view to enhancing the group’s resilience.
We’ve presented them in the order in which they should be closed. So the first of these is the proposed acquisition of EQUANS, which should enable us to create the #2 worldwide and multi-technical services. This would actually change the very scale of the group. And the second, hopefully the second module will be the proposed merger between TF1 and M6. Thus, creating a major French media group.
Now our performance in 2021 has been aimed at creating and sharing value. Something we’ve been doing for a number of years I just wanted to remind you of that.
The first pillar of this strategy is the group’s positioning in very diversified businesses that drive growth over the long term. This enables us to ensure that the group is resilient in difficult times. Today, we’re going to present results that are a direct consequence of what we’ve done. In other words, we’ve strengthened and grown the construction and multi-technical services businesses. We have continued to ramp up the growth of retailing common consolidated TF1’s positioning to enable TF1 to take up the challenges created by the global platforms. This will be through streaming and content.
The second major pillar of our strategies, optimization of our margins and optimization of the group’s development. For each of our businesses, we have margin optimization plans that are producing results. Colas will be a very good example of that. We also have a very selective investment policy and external growth transactions are highly targeted as was the case with the acquisition of Destia to develop Colas in Northern Europe.
Our financial strategy is highly disciplined and our CSR, Corporate Social Responsibility strategy, which we presented to you in December of last year. Our CSR strategy is at the core of our growth strategy, but I’ll come back to them. The third pillar of our strategy is our cash culture. Recurring free cash flow and sharing value with our stakeholders, particularly our clients, employees, and of course our shareholders, which of course, it means that the dividend continues to grow.
I’d like to elaborate a little bit on the 2 transactions that we initiated in 2021. Again, in the order in which they should be closed out beginning with EQUANS here again our goal is to become a leader in multi-technical services operating in growth markets, energy transition, digital transition, and EQUANS is a company with a very large number of small contracts with, meaning that the whole business is highly resilient.
This is an acquisition which, thanks to the contribution of our own big Energy & Services business, we’ll create synergies and improve our margins. I’ll elaborate on that in a few minutes. There’s very little CapEx is not capital intensive at all, meaning that we are — have a strong cash generation. And of course, where are we in this transaction on the righthand side? You will see the forecast schedule. Syndicated loan was announced on the 3rd of December last. This is how we plan to fund the closing.
We are awaiting the opinions of the employee representative buddies at Engie and EQUANS in the next few weeks, which will then enable us to sign the share purchase agreement. We expect that the closing will take place after the various opinions were awaiting and the antitrust body. Also, the agreement for foreign entities to purchase EQUANS, we expect all that will lead to a closing in the second half of this year.
Now with the merging of TF1 and M6 this would create a major French media company. There are 2 parts of this transaction. The first of these is the more defensive side which by means that by aggregating the cost of programming, this will give us greater access to content. Of course, that the content side of GAFA means that we are finding it increasingly difficult to have access to content. The more, let’s say aggressive side of this transaction is to ramp up the rollout of our French streaming platform over the next few years. So there’s a gradual buildup of television and consumed in a non-linear manner in other words streaming. This means that we will be able to arm the group for this transition to streaming.
Third aspect were far from that. Negligible is the estimated annual synergies which we have estimated between €250 and €350 million. This should enable us to fund the more aggressive side that’s of the ramp up of streaming. On the righthand side, you have the time line. This is a forecast to time line anyway. Broadly speaking, we started exclusive negotiations last May. We’ve been talking with the antitrust authority and expect the anti-trust authority’s opinion in the autumn of this year. It will take a few weeks before the new market regulator authorizes this change of control. All these leading to a closing of the deal and ultimately lead to the merging of these 2 entities after the various AGM somewhere at the end, the very end of 2022 or the early days of 2023.
So our 2021 guidance, well, we’ve either achieved or exceeded our guidance in the various areas. You see that on Slide Number 8. We announced sales very close to the level of 2019. We’ve achieved that because we finished the year at €37.6 billion, which is just -0.9% below the level we achieved in 2019. We gave guidance for our current operating profit very close to 2019. Again, we’ve exceeded that because we finished the year at €1.7 billion, up €17 million on 2019. And the third guidance was our current operating margin which we announced at the pre-crisis hour that’s pre-COVID if you prefer. We’ve exceeded our guidance because we finished with a margin of 4.5% up 1.1 percentage point by comparison with 2019.
Let’s now take a look at the group’s key figures. This is Page 9, at €27.6 billion annual sales were up 8% by comparison with 2020. Sales are therefore back to the level we had before COVID. This pickup is particularly noticeable in France, France is a country which was particularly affected by a very strict lockdown and a very gradual pickup of business in 2020.
Current operating income, current operating profit at €1.693 billion, which is an increase of €471 million over 2020 and a €17 million increase over 2019. Again, the basis for comparison the most relevant one is 2019 because this was before the COVID crisis. Current operating margin at 4.5% up from 3.5% in 2020. Also, above the level we had in 2019, which was then 4.4%. And this margin improvement was mainly due to the very good performance of Colas approved their margins and the TF1 who posted a record year.
Finally, the group’s net profit was €1.125 billion after €1.184 in 2019. A number of non-recurring items in particularly the contribution of Alstom €221 million — €219 million sorry, in March and June when we sold our Alstom shares, plus €31 million in non-recurring expenses. Now these are expenses that were recorded in 2021 for the purposes of the EQUANS’ acquisition, and the merging of TF1 and M6s were mainly legal expenses. The economic research and so on.
Now the group’s financial structure is particularly solid week’s net debt is at a historically low level at less than €1 billion at €941 million at the end of the year, after being close to €2 billion at the end of 2020. Debt ratio is down from 17% in 2020 to 7% of equity that’s debt equity ratio down to 7% in 2021. This financial structure enables us to be reassured about our future investment strategy. And of course, if you look at the rating agencies, figures, this was subsequent to the announcement we made about the EQUANS or proposed EQUANS’ acquisition. While Moody’s confirmed a rating of A3 with the stable outlook and Standard and Poor’s have given us an A- with a negative credit watch.
This brings me to the dividend. The dividend is up, the Board of Directors will be proposing to the shareholders at the AGM a €0.10 increase to €1.80 per share. That’s a 6% increase over 2020. Again, a reflection of the group’s confidence about its future. On this slide, you can see a good illustration of our dividend policy, which is a graduate retching up of floors that we exceed from time to time.
When we presented the results last year, we said we’d come back to give you information about our CSR approach. So here again we have enumerated 4 aspects of this CSR reproach that characterized 2021. The first of these is quality of life at work, which we’ve improved, particularly with the extending of the common benefits platform that we’ve extended worldwide. This is the program we called [V-Care]. The second aspect is the launch of our second agenda bands plan and 2021 – ’23, which we’ve launched a global on a global scale for the entire group.
Third aspect is the pledges we’ve made to set up transversal committees to work on biodiversity, whether it’s about preserving or restoring biodiversity in each of our business lines. And finally, after presenting our climate strategy back in December last, we told you that we would get back to you in early 2022. To report on the expense, we have envisaged with a view to reducing our carbon footprint. So we’ve looked at the expense over the period of 2022 to 2024 and we’ve estimated the total expenditure at €2.2 billion. This will be aimed at methods are mostly construction methods, which will enable us to reduce our carbon footprint.
I propose now to move on to our review of operations beginning with the construction business. On this slide, you have the Birmingham tramway built by Colas High and we start with the order book for the construction business. The backlog stands at €33.2 billion. The share, the [OVC] shares is up 3 points at 65% of the backlog in international markets. And as you can see on the bar chart, if you look at the backlog, we’re very close to the levels we’ve been having ever since the end of 2018 anywhere between €33.1 billion, €33.2 billion with the low point at €33 billion in 2019 at €33.2 billion. That does include the Destia order book to the tune of €755 million.
On this slide, you have one of the operations we’ve been conducted in the U.S. with the Logistics Center in Miami. If you look more closely at the backlog at Colas, we have a record level €10.7 billion of 9% on constant Forex not including the main disposals and acquisitions by Colas and that reflects the fine sales performance especially in Q4, you have 2 major projects that we clinched in Q4. First, the design and build projects for the Manila subway in to the tune of €680 million. And then we have a multi-annual maintenance contract for the motorways in the UK for €400 million of which €160 millions recognized in the order book.
And reconstruction we had the backlog stands at €20.8 billion in December 2021 it’s up compared to end September. And so, we took on new deals in the Q4 and even though some business were exactly executed, we have been able to grow. We have significant new orders, the deployment, the rollout of FTTH in Brittany, the 2 data centers in Frankfurt or the new property development business in Gentilly. And Bouygues Immobilier, our property company, the world bookings are up, reservations are up 16%. But the problem is that we have — it’s taking longer and longer to get building permits plus in the commercial business that is for commercial property. Customers are waiting and seeing to see how they will sort of reorganize after the COVID situation and work from home and that sort of thing. So they have to decide what their office policy will be. That is commercial property.
On page 17, we look at the financial performance of our construction business €27.9 billion. The revenue is up 7%. In all 3 businesses, current operating profit stands at €825 million much better than 2020 current operating margin 3.0%, 1.3 percentage points up compared to 2020. Current operating profit in 2021 is very close to 2019 even though revenue is down 6% over the periods, which shows that all the measures have been working hard to boost profitability.
Now let’s zoom in as it were on energy and services. Of course, we cannot discuss the numbers of EQUANS that are — that is being acquired by Engie Battery you can see a parallel between the 2 EQUANS and energy and services. And so, we wanted to zoom in to just show what kind of company this was and the work that had been — that has been achieved. We — there were some significant improvements at Bouygues energy and service. And we’ve been working on improving profitability and the results are right there. So Bouygues energy and service is there throughout the supply chain from the generation of electricity to the end use.
We have 22,000 employees around the world that Bouygues energy in service BYES has very diversified portfolio. Many small contracts we have the average amount is €64,000 per contract. In 2021, there were as many as 55,000 different projects running throughout the geographically, we have a diversified footprint as well 1/3 in France, the balance out of France. We — the business segmentation is also well balanced because the most significant one is building — the building management system that accounts for about a quarter of our business and the rest is evenly distributed and so the risk is evenly distributed as well.
We also need to point out that 50% of the contracts were more than 8 years in the making is that means we have long relational long one. 8-year contract with the long-term relationship and with the 80% renewal rate. If you look at the sales of Bouygues energy and service, we left out Axiome, which is counted on the equity method. We are 9% up compared to 2021 — compared to 2020 because there’s very little CapEx use. The CapEx to sales ratio is low. Most of the revenue turns into — but most of the profit turns into cash.
And the second slide shows both. There are, confidence in our capacity to improve profitability and gain an additional 5% — rather to go above 5%, I beg your pardon. Ever since 2019, we had someone from Pierre Vanstoflegatte came from the service business. He decided to work on profitability giving preference to profit margin then volume and this happens to be a growing market and the digital transition and indeed the energy transition will provide growth over the long run and so, we can certainly gain from the growth in the market itself.
But that means we can, in that favorable context, give a precedence to profit margin. So in 2018, we were in the red. 2019, we crossed over to plus 2.8 in 2021. And we are confident that we will reach the 5% mark, which is in medium term which is also the objective we have for EQUANS. The action plan that [indiscernible] launched, that was in agreement with the EQUANS management when we decided to join that company or to take them over rather what works with €4 billion could work with €12 billion.
Of course, we’re looking much larger numbers but the same order of magnitude and so we have every reason to believe we can achieve the same profitability. The cash generation now almost €500 million between 2019 and 2021, our Bouygues energy and service is now standing at almost €600 million by end 2021. Now that’s the net cash position made possible because of course, we have been working hard at making people a cash sensitive that Bouygues energy and service.
We work with the agencies just like Colas. These branches are in a position to deliver profit margins that are consistently good, provided of course, we the decision making takes place close to the field. And indeed, our management must be close to the field and that is what’s happening now. And that Bouygues energy and service has been delivering and so we’ve, as I said very confident that we’ll be able to pull off the same kind of performance with EQUANS.
TF1, well the numbers were published on February 11, Gilles here spoke to you about the performance at TF1. The numbers are much better than in 2020 and indeed 2029 revenue €2.4 billion up 17% on one year 4% compared to 2019. That was made possible because of course there was sustained advertising investment after the end of the COVID crisis. And then also, there was content production by new and there’s a real demand for that. And so, the fact that we have a good production force with the new and that certainly makes a big difference. So current operating profit standing at €343 million, which is better than — certainly better than 2020, where it was below 200, even better than 2019, where it was at 255.It’s a 15-year high. And of course, the F1 objective was to have operating margin above 12%.
But we certainly achieved that because now we stand at 14.1% and so well above the target. So what’s the outlook for TF1? Well, we certainly propose to strengthen the media industry as it were. We are reaching out to our viewers, but also we keep — we are well up of new developments. There’s a real desire for content worldwide and we are providing it on every platform, especially the non-linear platforms. Bouygues Telecom now, of course, sales have been growing steadily. December ’21 gives us — not including machine to machine, we have as many as 14.8 million mobile plan customers including growth of 2.6%, including 2.1 million acquired through BTBD. BTBD being the company we acquired at the end of December 2021.
So in 2021, in spite of — well, we have an additional 569,000 customers in 2021, including a 133,000 in Q4. We have the numbers given in — regarding ambition for 2026. So we gave you that chart last year. We wanted to have 4 million new customers by end 2026. Well, out of the 4 billion — 4 million new customers, we already have 2.6 million acquired in 2021 alone. And so, all we need is to have an additional €1.4 million over the remaining 20 quarters, and we are confident that we’d be able to achieve this. Regarding our fixed customers, we have in FTTH as — well, they account for 52% of the — all of our fixed customers, 780 new customers in 2021 with 201,000 in Q4 alone. And so we have 4.4 million new customers, so 278,000 new customers in 2021, including 74,000 in Q4. The target was to have 3 million customers in FTTH by 2026.
We already have 0.7 million and so 2.3 million new customers in FTTH is our ambitions for 2026. And again, we’re very confident that we’d be able to achieve this. All the more because Bouygues Telecom has just concluded, well, at least found the way it means to roll out fiber throughout the French territory. By end December 2021, we had 24.3 million premises already marketed, up 6.6 million year-on-year.
And the second part of this is, of course, we’ve been stepping up the rollout of this fiber with Vauban Infra Fibre, which will make it possible to cover the entire territory including that now covered by SFR. And so we will be cover – but we will also reach out to the PIN network that is the further the less covered areas. And so, we had 24 million premises at end 2021 and the additional FTTH customers will be easily found to arrive at ambition 2026, which you saw in the previous slide.
Another important point in what seems to be a turbulent context, you may remember, ABPU, average billing per user now — that’s the bill paid settled by the customer, which stands at €20.5 per month, up €0.50 a month year-on-year. And that’s for the mobile or the fixed it stands at €28.2, up €0.40 over the year. You have to keep in mind that when we acquired FTTH acquisitions, well, new customers, the first year, the customer gets a 50% discount over the — so having ABPU going up in that context is something of a challenge because we’re reintroducing a large number of customers who are paying half the price. And yet, we managed to increase the average billing per user.
Looking at our guidance, where we reached our objectives in 2021 organic growth was about 5%, so we met that guidance. The expected EBITDA, including B2B and including the dilutive effect of these customers because the BTBD ABPU was less than that of week. And yet, we managed to increase EBITDA and CapEx — net CapEx was to about €1.3 billion. At least the figure was reached at roughly €1.3 billion. Now of course, when ABPU goes up, it means that revenue goes up. That was up 13% — sorry, 14%, including the service business, including BTBD. But even when you leave them out, it’s still 5%. So it is quite a significant performance in what is after all, a rather well flat market — has been flat for the past 3 years.
The revenue from the fixed is up 3%. If you look at the years ’19, ’20 and ’21, on the services sales, and that’s almost an additional €1 billion that was added over the past 3 years, €990 million. Mr. [indiscernible], correct me if I’m wrong, but he is nodding saying that it’s the right figure. And EBITDA after lease is up 7% at €1.1 billion — €2.2 billion — €1.612 billion, sorry. Well, the mix effect of FTTH means that you have new customers who pay half the price the first year. And yet ABPU is up year-on-year.
What’s the outlook then for Bouygues Telecom in 2022? Well, we’re looking at growth in sales from services estimated at about 5%. EBITDA increase after lease is about 7%, even though there are additional expense — capital expenditure for the fixed line and the mobile network is being more dense and so it means that there’s more leases that we need to pay out and gross capital expenditure confirmed at €1.5 billion, and that’s to be ready for a growing base, but also new users, especially in the mobile world.
Having said all these, I’ll now give the floor to Pascal Grange, who will give you a detailed presentation of the numbers.
Pascal Grange
Thank you, Olivier, and good morning, everybody. Just a few additional comments about the financial statements at December 31, 2021. So the income statement on Page 32, I’m not going to elaborate on sales and current operating profit. They’ve already been commented by Olivier.
As for other operating income and expenses, in 2021, they amounted to €40 million. Just for the record last year, this was an expense — a non-recurring expense of €98 million. And as Olivier said, at the end of December 2021, the figure actually includes €91 million in nonrecurring income at Bouygues Telecom, mainly due to capital gains on the sale of data centers. This income is partly offset by nonrecurring expenses amounting to €8 million at Bouygues Immobilier, a part of the adaptation measures. Also €10 million at Colas due to the decommissioning of Dunkirk and the acquisition of Destia plus €31 million at TF1 and Bouygues SA due to the EQUANS project and the proposed merger of TF1 and M6.
Cost of net debt has improved by €12 million over the period, mainly due to interest expense on bonds that are lower at Bouygues SA with the redemption of more expensive bond issues. As for the lower part of the income statement, we have an income expense of €432 million at the end of December 2021, up on 2020, which is only natural because income was higher. This calculation reveals an effective tax rate of 29% after 36% in 2020.
2020 was a very special year due to the COVID, but also after 32% in 2019, which was mainly due to the lowering of the rate of interest of the tax rate should I say, in France. Share of net profit of joint ventures and associates to the end of 2020 and 2021 was relatively stable. This item includes in particular the contribution of Alstom. That was €219 million, as mentioned by Olivier, plus losses generated by SDAIF and Bouygues, Salto and TF1 and WOJO and Bouygues Immobilier. Overall, net consolidated income was €1.305 million at the end of December. The group share was €1.125 billion, up from €696 million at the end of 2020.
Let’s now move to Page 33, to look at the group’s balance sheet at year-end 2021. The total of the balance sheet was €44.6 billion, up from €40.6 billion at year-end 2020. Non-current assets amounted to €21.7 billion, up slightly up by €189 million, exactly. Several explanations for this variation. Property, plant and equipment was up €562 million due to investments in the network carried out by Bouygues Telecom. As for goodwill, goodwill rose by €24 million, almost entirely as a result of the Destia transaction. Investment in joint ventures and associates was down €665 million, of which €711 million were due to the various transactions we carried out in 2021 concerning the stake in Alstom.
Current assets rose by €3.8 billion over the period. This included €2.3 billion increase in cash and cash equivalents. On the liability side, shareholders’ equity rose by €917 million. This, in particular, reflects our income for the period, the dividends and income and expenses recognized directly under equity. Non-current liabilities rose by €359 million. This was mainly due to the increase in non-current debt. That was a €261 million increase. The reclassification of current liability for the debt we redeemed recently was compensated by a new bond issue for the same amount. This is in February 2013 for a total of €333 million borrowed from the European Investment Bank.
Current liabilities rose by almost €2.8 billion between the end of 2020 and the end of 2021. And this increase was mainly due to the increase in current debt. That’s an €850 million increase as a result of the reclassification of the Bouygues SA bond maturing in February of this year and current operating liabilities in line with the increase in business in 2021.
Let’s now move on and take a look at our net debt and how it evolved in 2021. This is on Page 34, by the way. As Olivier said earlier on, our net debt increased €941 million at the end of 2021, down over €1 billion by comparison with 2020. This is due to the following: €984 million due to the disposal of our stake in Alstom in March; and then in June, €265 million expense on acquisitions, essentially the acquisition of Destia by Colas, €49 million generated by the raising our exercising of stock options and others and we spent €93 million to buy back treasury shares, including €5 million under the terms of the liquidity contract.
The amount spent on treasury shares is much higher than what we expensed in previous years. As explained at a previous presentation, we decided to offset the dilution brought about by the exercising stock options and to limit the impact of future Bouygues conference [ESOP] transactions. The dividend represents €738 million, and operations generated a positive flow of €1.189 billion. I now propose to move on to the next slide to look at the details in the net debt position.
Let’s begin with net cash flow, which includes the lease obligations amounted to €2.8 billion, up €467 million over a 1-year period, in line with the increase in business over the period. This is also higher than 2019, where just for the record, net cash flow amounted to €2.64 billion. Investment in operations amounted to €1.9 billion. That’s net CapEx, €1.974 million. That’s a €362 million increase and a reflection of the upward trend in investment, in particular, at Bouygues Telecom and at accelerating the group’s activity in the next few years.
The change in working capital requirements for operational reasons amounted to a total of €359 million. This gives in particular, a sharp increase in working capital requirements for operating purposes. That was a total of €204 million after a period in 2020, which saw working capital requirements increased by €477 million. Overall, cash flow generated by operations at the same levels in 2020 despite a sharp increase in CapEx, which is in itself a very satisfactory performance.
That bring me to the end of my presentation for financial statements, so thank you for your attention. And Olivier, I can give you back the floor.
Olivier Roussat
Let’s now conclude rapidly by a few words about the outlook for the group in 2022. In 2022, the group has started the year with confidence despite what’s currently happening in Europe at the present moment. But we expect sales to increase further. As indeed, we expect current operating profit to improve in 2022. As for our carbon footprint, which is an important and essential aspect of our future and after approving the targets set by SBTI for Colas and Colas Group.
We are now aiming at group certification for all our businesses, which will enable us to certify our carbon reduction trajectory, the one we have proposed. One of the group’s particularities is the fact that we have made commitments about all our activities, whether in scope 1, 2 or 3. We also have 2 of our businesses that fall under Scope 3B. A lot of businesses only come under scopes 1 and 2. But in construction, endpoints and particularly concrete have a considerable impact in terms of our carbon footprint. There’s not much point in making commitments if we don’t include Scope 3, which is what we did. This is why we have also made commitments under Scope 3.
I said, we started the year in good conditions that we are confident about the merging of TF1 – M6, which will give us a good foothold in the future and changed the very scale of the group, I have to mention EQUANS.
That brings me to the end of our presentation. The time has come to answer your questions. I am here with all the heads of our various businesses and the group’s senior management. Ladies and gentlemen, time for questions, if you have any.
Question-and-Answer Session
Operator
[Operator Instructions] The first question is from Nicolas Colisson from HSBC.
NicolasCote-Colisson
I have 3 brief questions concerning construction, first of all. The inflated prices of materials, could you give us the breakdown of your sales figure, particularly your ability to pass on price increases. And that includes subcontracting and wage increases.
My second question is more surprising, but it concerns country risk, 12% of your sales come from outside of France and the UK. I was wondering what proportion you have in Eastern Europe and what are the potential cost consequences of the Russian intrusion in Ukraine or in terms of sanctions?
Third question on telecoms, 7% EBITDA growth expected in 2022. Has that anything to do with the agreement you just signed with Vauban.
Olivier Roussat
I’m going to let Benoît think about the answer to your third question. In the meantime, let me work backwards as regards Eastern Europe. We are not — we don’t have any presence in Russia or Ukraine. We’ve very little presence in Eastern Europe. Colas has some presence in Hungary and Slovakia. But broadly speaking, our footprint is very small in Eastern Europe, and the figures are very small. Big construction also in operations in Croatia. So country risk is — well, country risk to our sales figure is very, very small.
There may be the consequences of the overall economic situation, but it’s not because we’re not present in certain countries there will not be any impact on the broader economy. Third question concerning construction costs and how we can pass on price increases on raw materials to our clients. We have very different situations in construction, depending on Bouygues Construction, Colas, Bouygues Immobilier. Let me begin with Colas.
Let’s ask Frederic to tell you about how he sees our ability to pass on these costs.
Frederic Gardes
Okay. Well, for cost, we’re relatively covered against inflation, be it in terms of staff costs or raw materials because our contracts tend to be short. As Olivier said earlier on, we worked through agencies and most of our contracts are short term. We have a lot of public contracts with the revision formulate that protect us not completely, but protect us rather well against increased costs. So broadly speaking, we have very little exposure to this type of risk. We’re rather well hedged.
Olivier Roussat
Thank you. Pascal?
Pascal Minault
Well, as we’ve said, the situation is very different in energy and services. We too have a rather short contracts and ability to adapt our sales price rather quickly as our costs increase. For the longer-term contracts or larger contracts, how much can we pass on? Well, in our very large infrastructure projects, which is about 10% to 15% of our sales, we can, but in public and certain private contracts, we have price indexation formula, which means that our prices will increase and our taking will increase depending in accordance with cost increases. Finally, for fixed price contracts, with purchasing, we have a number of master contracts over a longer period of time, but with indexation that enabled us to caution any sharp increases in costs.
Olivier Roussat
The final part concerning Bouygues real estate, Bouygues Immobilier?
Bernard Mounier
We too are somewhat protected in particularly in the tertiary sector because our products are indexed. As for residential property, part of our production is sold as our programs evolve, that’s about 60%. Though we also have a formula for price indexation that covers us against these increases.
Olivier Roussat
One final point concerning wage increases that you referred to, it’s not so much a matter of wage inflation. It’s just that it’s — the problem is actually finding the resources for our business. There are 2 very sensitive areas, North America and the UK, where there’s a lot of tension in the labor market. So that’s the problem we have with resources. As for inflation, as you’ve heard, we are capable of passing it on because they’re largely covered by indexation. Telecoms, Benoît had time to prepare his answer.
Benoît Torloting
Okay. The project…
Olivier Roussat
This is his first time to take the floor. So I’m sure you’ll be kind to him.
Benoît Torloting
The question concerns the impact on the EBITDA, especially as a result of the Vauban contract that we announced this morning, which would secure access to fiber in all our public initiative network areas. This will be a marginal impact. The idea behind this project and the consequences indeed are all included in the 2026 plan that we presented to you last year. So it’s all built into our guidance.
Olivier Roussat
Thank you, Benoît.
Mathieu Robilliard
Mathieu Robilliard from Barclays. I have 3, if I may. My first question concerns construction, pure construction. The group guidance for you’ve given it for sales and the current operating profit. Could you give us some more detail for construction? What’s your medium-term target in terms of margin? I know you intend to increase it. But do you feel that this — we’ll see this come through in 2022?
My second question concerns working capital at group level. As you said, you’ve performed well by reducing your working capital. You’ve done so for several years now, but do you believe that you still have room to improve on working capital? It’s not something you give guidance on, but do you believe that you can improve your working capital in the future?
My third question concerns telecoms, I see that your ARPU has continued to increase despite promotional drives at the entry level in the market. But I was wondering if in 2022, you will still have the possibility to increase prices, promotional prices are low. So I think there’s going to be — the gap is going to widen, which will probably lead to a certain level of churn. So my question is, are you confident about this gap gradually being created?
Olivier Roussat
Okay. We do that to I’m going to talk about improved margins in construction. And broadly speaking, we are back to our pre-crisis levels in terms of margin. In 2022, we expect our current operating margin to increase on the margin in 2022, initially one, I should say.
For Colas, sharp upturn in business in 2021, particularly the initial benefits of the changes that were brought in by Frederic Gardes over the last 2 years with improved productivity in all industrial businesses. The new businesses of Colas, which has also improved profitability as a result of which we can confirm our current operating profit margin, which we estimated 4% for 2022, which will be higher than in 2021. It was 3.3%, not quite 4%, which is the target we’re aiming at for 2023.
As for Bouygues Immobilier, our current operating margin will be stable. We expect it to be stable this year with sales and current operating profit at the same level as in 2021. I forgot to mention that we have not got a lot of stock to sell. Working capital, maybe Pascal would like to take that one.
Pascal Grange
Well, as you pointed out quite correctly, we do not give any guidance on changes in working capital for a very simple reason because it’s a combination of several factors. Have we any room for improvement as regards to working capital? The answer is yes, we have. We found that in all our businesses. A lot of work has been put into improving our working capital, but we are — we continue to improve. And you will have seen in the figures that Olivier gave you for Bouygues energy and services. But over the space for a few years, we’ve improved considerably. That’s the first factor. We have action plans, plans of action that enabled us to improve our working capital.
The second factor is the rhythm of our contracts. They anticipate down payments into immediate payments. And that the whole series of mechanisms whereby the contractual clauses cannot be modeled. And so far as it can be modeled, we ask our people to do the very best they can to achieve the best possible results that’s produced results over the last 2 years. But we can’t say at the start of the year, if our working capital will have improved further or whether will have remained stable or whether it will deteriorate someone.
There’s nothing really at stake here. It’s really the pace of our contracts that determines working capital.
Olivier Roussat
Benoît, a few words.
Benoît Torloting
As for the mobile market in France and the average revenue per user, yes, there are still promotional drives, and we systematically respond. Every time there is this type of promotional drive we gain customers. Now however, these are limited in time. They’re usually for a short period. Now they tend to be over €10 whereas historically, at least not so very long or we were and we also drives around the €5 mark. They’re now always over 10, and they’re always concerned entry-level strictly digital offerings. So this does not, in any way, counter our strategy of increasing our APU. But increased usage is a great way of rolling out a more-for-more strategy.
Operator
The next question comes from Mrs. Virginie Rousseau from ODDO.
Virginie Rousseau
I have 2 questions on construction. #1, regarding orders from local authorities. Some of your competitors found that in H2, there was not much by way of public orders. What are your — was that the same for you? What are your expectations for 2022 in France from local authorities in France. That was question number 1.
Number 2, Colas, we find that the EBIT margin is up compared to 2019. But EBITDA margin is down because there’s less depreciation compared with 2019. Can you tell us why?
Olivier Roussat
Frederic is the man to take the answer.
Frederic Gardes
Yes. Well, regarding Part 1 orders from local authorities. H1 was pretty buoyant, indeed better than expected, but it’s true. H2 was not as dynamic. We do expect some recovery in 2022, nothing crazy though, a moderate resumption in business. But of course, we’re not basing ourselves just on volume but new business and the transformation of our business.
France, it is, of course, so what has driven Colas’ numbers is orders from the private sector. Regarding EBIT versus EBITDA, for the past few years, we’ve been focusing our investment where it does make a difference on manufacturing assets when you have solutions to rent out, to lease out equipment or such like we might do this, hence, less by way of depreciation. If there are fewer acquisitions, there’s less depreciation as well.
Olivier Roussat
But what you have to keep in mind is we do want to keep the cash to possibly acquire companies, and that means that the assets will enable us to acquire new companies rather than being in a building that already belongs to us. We have a question on the other side, on the other line, the English line.
Operator
Comes from the line of Sam McHugh from BNP Paribas Exane.
Sam McHugh
Just 2 questions, please. The first on the telecom business. We’ve seen a very nice acceleration in broadband growth in 2021 versus 2020. As you’ve extended your fiber build and the BTBD distribution deal. As we look out to 2022, do you think we should be expecting a further acceleration in broadband growth in part? And the second question on Energy & Services. Thanks for the detail on contract duration. You talked about inflation earlier. When I think about the average of 8-year contract duration, how are those contracts typically priced for inflation.
I don’t know if you can give us any color on EQUANS and how EQUANS may be different or the same to your existing energy and services business in terms of contract duration and how inflation gets passed through on those contracts.
Olivier Roussat
So we will start first with Benoît. We will let the time to Pascal to prepare the answer for the second one, which is not an easy one. So first with Benoît.
Benoît Torloting
I think the question was about the BTBD contribution to our business. In fact, the BTBD integration started last year is going very well, completely on track with our objectives. BTBD is in fact now selling Bouygues Telecom broad offer since November and it’s completely in line with what we expected. So indeed, BTBD will be part of our strategy now for our growth, both in mobile and in broadband in the next year. And we are completely in line with what we had anticipated for the integration of BTBB.
Olivier Roussat
Thank you, Benoît. Pascal, please?
Pascal Minault
Okay. I’m not sure I captured everything from the question, but I will answer for the energy and services. We saw we have very different types of businesses and contracts. And for instance, for all our long-term contracts like facility management, obviously, those contracts are indexed. So the price are reviewed regularly in line with inflation.
When it comes to the majority of contracts in terms of number, there are short-term contracts. And obviously, there’s capacity to adapt to pricing to the tuitions and costs. As for the rest of those contracts, they are similar to our constituent contracts. And again, either they are revised indexed or if the fixed pass contract, generally, we have provisions and measures as well that we take with our suppliers to ensure that we more or less stay within our forecast costs.
Olivier Roussat
And again, when we compare this kind of contract, we are quite short compared to what we do with the normal construction business, it’s very similar to what we do with Colas. And thanks to the fact this is short term, it’s quite easy to give back the inflation to the final customer.
Operator
The next question comes from the line of Nicola Gifford from Goldman Sachs.
Nicola Gifford
I had 2 questions. First on the telco and TF1 strategic initiatives. I’d like to get a bigger picture of your thoughts on spinning out your telco and/or media businesses. Is this something you would consider as a possibility going forward?
And then secondly, on your telco B2B business, at your CMD last year, you outlined ambitions to double your B2B fixed market share by 2026. Just any color on how that’s progressing would be great.
Olivier Roussat
Could you just — I didn’t catch the first one. Could you repeat it again, please?
Nicola Gifford
Sure. On your telco and TF1 strategic initiatives, just a bigger picture question on what your thoughts are on spinning out your telco or and your media businesses? And is this a possibility or something you’d consider going forward.
Olivier Roussat
Benoît for the second one.
Benoît Torloting
I will answer the second question, the B2B growth for Bouygues Telecom. We announced that we wanted to double our market share in B2B until 2026. And in fact, we are confident in that development because if you look at the B2B market on some parts of the market, which is mobile for high-end B2B, we have 20% or 30% market share. But on the broadband market, we are below 10% market share. On the small enterprise markets, we are around 10% market. So we have part to grow in this area. We are completely on track.
Every year, we have a high growth in this area. We are facing also new services in cloud, in integration. So we are on the track to develop this activity, and we have the potential really to double our market share, especially in the broadband area of the B2B market.
Olivier Roussat
For your first question, we consider that the structure of the group right now, when we consider all our activity, our 5 different businesses, we consider that all of these 5 different businesses are core business. So we didn’t intend to sell any of them. And we don’t see any reason to do it because we have the means to be able to develop them at the levels they need. So there is no reason for us to dispose one of them.
Operator
There are currently no questions in the queue. [Operator Instructions]
Nicolas Cote-Colisson
Nicolas Cote-Colisson, HSBC. 2 follow-up questions on orders from the public of the local authorities, but — it’s true in France with local authorities. But internationally, I mean, this is counterintuitive when you have all sorts of stimulus plans around the world and yet not much happening. Is the low level of orders you take deliberate on your part, you prefer the private sector? Regarding the acquisition of EQUANS, you are talking about a €7 billion acquisition. What does…
Olivier Roussat
I didn’t say anything, Mr. Cote-Colisson, about the purchase of EQUANS. We have a development strategy and growth strategy, and we have an example with Colas when we invested with Destia in the north of Europe — in Northern Europe. But there is no similar bolt-ons planned for EQUANS at least or maybe something got distorted in the microphone. But orders from local authorities, then back new developments in North America.
Frederic Gardes
Well, you asked about the private versus the public sector. Traditionally, Colas indeed has a significant market in the public sector, and we are developing the private sector as well. But the 2 are separate, and one doesn’t go against the other. Regarding the public market, there are similar plans around the world, but they take — it takes a while before they start kicking in because the local authorities have to decide what it is they want to do and how they do it, et cetera. And in North America, the Biden plan may — probably will have an effect on our business there. But again, that will be happening until the second half of the year, at least in the United States. And regarding the various stimulus plans in France, well, it’s pretty much the same, isn’t it?
In fact, it takes even longer than in the U.S. where in the U.S., deals can come a bit online faster than in France. In the U.K., there’s again post-Brexit plan that is starting to take shape. And it’s in terms of volume, we’re — we’ve been gaining a few new deals. But all in all, we expect the effect — the full effect will be felt towards the end of the year.
Olivier Roussat
Thank you, Frederic. Nicolas, if you will, I mean maybe we about EQUANS…
Nicolas Cote-Colisson
No, no, maybe I misunderstood you — in the legal process with EQUANS, you were thinking that you may need to shed some of your assets in order to acquire EQUANS.
Olivier Roussat
No, what it is, is you have countries where when such mergers take place, you need the legal authorization. But if there’s, say, an American subsidiary of EQUANS, we need to go ahead from the U.S. authorities. But it’s not a competition issue. It’s the way – well, anything to do with investing in a foreign country has its implications.
Operator
We have a question from Mr. Mathieu Robilliard from Barclays again.
Mathieu Robilliard
Again a follow-up question on the indications you gave toward the — in the construction business, you have the pure construction as such. The backlog, I believe, is slightly down compared to 2021. That was the last question.
Olivier Roussat
Regarding Bouygues Construction, the revenue stands at about the same in 2022. We expect this to be stable. The order book is very much in line with the one we had in 2020. So we expect revenue to be stable.
Colas revenue is expected to grow faster, especially with the acquisition of Destia. Destia was acquired at the beginning of December 2021, so it will be consolidated this year. With Bouygues Immobilier, there of course because, well, we are – sales happened in the years before. But because in commercial property, there’s not much going on in few offers in 2021, we expect revenue again in 2022 to be stable compared to 2021.
Operator
Thank you. We see no further questions and so the host has the floor again.
Olivier Roussat
Well, thank you so very much. Have a lovely day. Thank you for attending this session.
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